Can oil go negative? It already has

Looking at oil price- Brent is now trading at $30/barrel, everyone is thinking how low can it go? Here is a perspective from Bloomberg.

According to report from Bloomberg, last night, some grades of oil price has now fallen below $10/barrel, and particular one grade has fallen to negative.

Crude oil has many varieties and grades. Two basic measurements are based on specific gravity and sulphar content. High sulphar contents are called sour crude and low are called sweet crude. And low specific gravity crudes are called light, superlight, extra light and others medium or heavy.

Different crude has different refining method, some lower grade crudes require specialized equipment not available to all plants so they usually go on a discount to the two benchmarks, Brent and WTI.

As of latest data, Canada's bitumen crude, which is a low grade crude oil is now trading around $8/barrel, relatively better but heavy West Canada Select from oil sands are now trading about $15/barrel.

Even crude from Saudi Arabia (heavy) trades at almost $4-5/barrel discount to Brent.

North Dakota crude from US, which is a very low grade crude oil has fallen to negative -$0.5/barrel. Producers will have to pay refiners to take that crude. Article in Bloomberg pointed out due to low grade of that crude and lack of availability of pipelines are causing this unusual but not unprecedented phenomenon.

Producers sometimes pay refineries to clear up their storage tanks.

Productions are likely to get halted for these crude types as they are selling at much lower than their production cost. That will help diminish the glut but as of now current production drop isn't sufficient to pull up crude.